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PVC Price hike to curtail EPS downgrade

Astral (ASTRA IN) delivered a subdued performance in FY25, with volume growth limited to a mere 3%. However, the outlook for FY26 looks more promising, supported by likely price hikes in the plumbing segment, driven by BIS implementation, anti-dumping duties and an expected pickup in demand that should spur channel restocking and enable double-digit volume growth. While near-term headwinds persist, ASTRAL’s strong brand equity positions it well to capitalize on the structural growth potential in the pipes segment. We retain Accumulate with a TP of INR 1,550 based on 55x FY27E P/E.

Volatility in PVC prices impacts FY25 performance: In Q4, ASTRAL reported a 3.5% YoY increase in net sales to INR 16.8bn, 1.1% ahead of our estimates. The plumbing segment remains flat YoY, but volume rose 1.3% YoY, showing improvement over flat trend in Q3. In FY25, sales volume grew 3.4% YoY despite industry contraction due to declining polyvinyl chloride (PVC) prices, which led to reduced distributor inventory. The bathware segment posted INR 1.2bn in sales for FY25, up 51% YoY, in line with its target. Domestic adhesives (Resinova) rose 20.1% YoY in Q4, driven by rural penetration and Dahej plant ramp-up, while Seal IT UK declined slightly YoY. For FY25, domestic adhesives grew 14.4%, matching expectations. The newly launched paints segment grew 5.7% YoY, with Astral Paints expanding into Rajasthan and Maharashtra. Sales from new products, such as Drain Pro, Silencio, and valves, are on track toward INR 15bn FY27 goal, having already crossed INR 1bn

Stronger FY26 likely: The company is poised for a robust FY26, driven by stabilization in PVC prices, potential implementation of BIS norms in FY26, and regulatory support that could trigger dealer restocking & bolster volume. The pipes and plumbing segment is expected to recover sharply, aided by steady raw material cost, new product traction, including Al-Aziz (new acquisition) fittings, and low base, with it targeting low double-digit volume growth. Additionally, the adhesives and paints segments are well positioned to gain market share through capacity expansion, product innovation, and a strengthened distribution network.

FY26 margin to improve slightly: In Q4, ASTRAL reported an EBITDA margin of 18%, flat YoY but ahead of our 17.3% estimates, despite a 40bp decline in gross margin. For FY26, management expects stable margin in the India business (plumbing & adhesives) and a sequential improvement in margin for both the paints segment and SEAL IT UK. This improvement will be driven by operating leverage in paints and cost optimization in the UK. At the consolidated level, margin is set to see a modest expansion in FY26.

Reiterate Accumulate with a TP of INR 1,550: We have slightly revised our FY26E earnings by 2.6% due to lower-than-anticipated margin, while keeping our FY27E earnings unchanged. We retain Accumulate with a TP of INR 1,550 on 55x FY27E P/E. Despite shortterm headwinds, ASTRAL’s strong brand positioning leaves it well-placed to capitalize on the long-term growth potential in the pipes segment.

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